Credit Spreads & CDS Basics: Hazard Rates, Spreads & Default Probabilities
Yield spreads and the Z-spread, the credit triangle, hazard rates and survival curves, the CDS premium and protection legs, fair spreads and upfronts, mark-to-market and the CDS-bond basis: 8 labs on fictional issuers. Educational and simplified, not affiliated with ISDA.
The first lesson is free — no account needed.
About this course
A credit spreads and credit default swap course that prices the credit risk of fictional issuers in a spreadsheet, for credit analysts, fixed income and risk staff, finance students and CFA or FRM candidates. You measure bond spreads over Treasuries in basis points and price a bond with a Z-spread over the spot curve, turn CDS spreads into implied default probabilities with the credit triangle, derive a hazard rate and build survival and default probabilities with EXP, value the premium leg of a 3-year CDS with quarterly survival and the risky annuity (RPV01), value the protection leg from the default probability of each quarter, solve the fair spread and the upfront on a standard 100 bp coupon, mark an existing CDS to market under seven spread scenarios and label the CDS-bond basis. Simplified and educational, not affiliated with ISDA. The first lab is free.
Lessons
- Yield Spreads & the Z-Spread: Pricing Credit Risk over TreasuriesFree
- The Credit Triangle: Spread ≈ PD × LGD Pro
- Hazard Rates: Survival and Cumulative Default Probabilities with EXP Pro
- The CDS Premium Leg: Quarterly Payments × Survival × Discount Pro
- The CDS Protection Leg: Expected Default Payments in Present Value Pro
- The Fair CDS Spread: Protection PV / Risky Annuity, and the Upfront Pro
- Mark-to-Market of an Existing CDS When Spreads Move Pro
- The CDS-Bond Basis: When CDS and Bond Spreads Disagree Pro